Used cars: before you buy - who owns the car?

Certificate of registration

Unless you are buying a used car from a licensed motor car trader, you must check that the person selling the car is the registered operator, or has the authority of the owner to sell the car. You should ask the seller to produce the car’s registration certificate (this is issued to registered operators with each renewal of registration).

If the seller cannot find the certificate or it has been destroyed, they can apply to have a (replacement) certificate issued (reg 42 RSV Regulations). In order to check that the person named on the registration certificate is the same as the person from whom you are buying the car, get some photo identification from the seller, such as a driver’s licence.

If you buy a stolen car, you may be forced to give it back to the true owner. Although you could try suing the supposed seller for the return of the money paid for the car, you are unlikely to recover it.

When a motor car trader acquires a car, its registration is transferred into the trader’s name; however, the trader may end up selling the car before this has occurred. If the trader is not recorded as the registered operator of the car, you should ask for proof that the trader acquired the car from the registered operator. Ensuring that a seller is authorised to sell the car is not as crucial if the seller is a motor car trader, however, as you may be entitled to compensation from the Motor Car Traders’ Guarantee Fund (see below) if the trader fails to transfer good title to the car (s 76 MCT Act)
.

Certificate of registered security interest

As well as checking ownership of a used car, you need to check whether anyone else (e.g. a finance company) has a security interest over the car. This only needs to be done if you are buying the car privately (motor car traders are prohibited from disposing of a car without first cancelling any security interest in it (s 48 MCT Act): penalty of 100 pu or 12 months jail (see also s 7(2) CSA).

If the seller owns the car outright, and no one else has an interest in it, the seller is said to have
clear title
to the car.

The VSR at VicRoads records details of security interests against motor vehicles (including those recorded by VicRoads as written-off vehicles), and it indicates whether or not there is a security interest over the car.

The CSA orders the priorities of the person possessing the car and of any people who have security interests. The VSR lets you see who, apart from the seller, has a claim over the car that must be satisfied before you can obtain clear title to it.

A purchaser will normally obtain clear title to a car unless a security interest (held, for example, by a bank or finance company) is registered on the VSR. If that interest is registered, then the purchaser’s title will be subject to the priority of the registered security interest. Consequently, if you are buying a used car privately, you must inspect the VSR, otherwise you risk losing the car.

If you know or suspect that the car is not registered in Victoria but in another state or territory, you should check the VSR in the appropriate state or territory. You can search the NSW, Qld, SA, ACT and NT registers through the Victorian VSR by calling VicRoads on 13 11 71, or check online at the VicRoads website at www.vicroads.vic.gov.au.

To search for cars registered in Tasmania check the Vehicle Securities Register (TAS) website at www.transport.tas.gov.au (follow the Registration Status Service link) or call 1300 135 513. For cars registered in Western Australia, check the Register of Encumbered Vehicles (WA) website at www.docep.wa.gov.au (follow the Consumer Protection link) or call 1300 304 024.

The VSR’s practice is to regard the VIN or chassis number (depending on the car’s age) as the primary identifier of a vehicle. (In
Roads Corporation v Allen Clarke Motors
[1993] 1 VR 194, the Supreme Court of Victoria held that the registration number of a vehicle does not enter into the definition of the “goods” for the purposes of the CSA, and that any vehicle remains the same item of “registrable goods” whatever registration number it happens to bear for the time being.)

To obtain information from the VSR, you must give the car’s VIN or chassis number, engine number and the registration number and state/territory (if the car is registered). Make sure you get these details directly from the car, not from the seller. Check that these details match the details on the registration certificate, before calling the VSR.

If, on inspecting the Register, you find that the seller does not have clear title to the car, you should not enter into a contract to buy the car (unless prior to, or as a part of, that contract the seller satisfies the claim that the security interest holder has on the car. You should ensure that this aspect of the contract is in writing, and not rely on a mere verbal assurance by the seller that the security interest will be discharged). You should contact the security interest holder directly if unsure about the seller’s arrangements and, if doubts remain, look elsewhere for a car.

A security interest that is unregistered, or that has been incorrectly registered, will be extinguished, if the purchaser in good faith buys the car for value and without notice of the security interest (s 7(1) CSA) (see
Montedeen Pty Ltd v Rossfield Nominees
[2000] NSWCA 112).

In the event of a dispute, advice given over the telephone will not be conclusive evidence of having inspected the relevant register, but it will be a preliminary indication of whether there is a security interest on the title. To protect your interests and ensure proof of inspection of the VSR prior to purchase, you
must
get a certificate from the VSR (containing information from the register about the car to be purchased) before handing over any money to the seller. A VSR certificate can be obtained from VicRoads.

When inspecting the certificate, you should ensure that the correct car has been identified on the certificate and that there is no other security interest holder.

Currency of the certificate

A certificate issued by the VSR will only show security interests registered at the time the certificate is issued. Any delay in purchasing the car will reduce the protection given by the certificate, as a security interest could be registered in this time. You should therefore get a fresh certificate if there is any significant delay.

Correctness of the certificate

If the certificate does not contain information from the Register relating to the car at the time the certificate was issued (i.e. a security interest exists but is not disclosed on the certificate), the security interest will be extinguished, provided that the certificate was issued on the day (or the day before) the first part of the purchase price was paid (s 7(1A), (1B) CSA).

A security interest holder can also apply to the Victorian Civil and Administrative Tribunal (VCAT) for compensation if a security interest was extinguished because it was not entered correctly on the VSR by VicRoads or because of section 7(1) or 7(1A) above (s 25 CSA).

Exceptions

Repairers’ liens and court orders

A
repairer’s lien
ranks in priority to any registered security interest (s 10(4) CSA). A repairer’s lien is the right of a motor vehicle repairer to keep possession of a car until it receives payment for repairs made to the car. VicRoads will also treat a court order in respect of a vehicle as having priority over a registered security interest.

Stolen cars

The CSA does not specifically provide for the registration of information about stolen vehicles. The VSR, however, is linked to police databases which record details of stolen cars, so checking the VSR may also let you find out if the car has been recorded as stolen (see s 24 CSA).

To fully protect your interests, however, you should verify the identity of a private seller to ensure that they have the right to sell the car. You should also check that all details relating to the car, including make and model, VIN or chassis number, and engine number correspond exactly to the certificate of registration. If possible, see if the seller has a copy of the contract of sale they entered into (i.e. with a motor car trader) and that the details of the vehicle and identity of the seller match. Remember, each year many people unsuspectingly buy a stolen car and have to return the car to the true owner, and lose their purchase price.

Sheriff’s warrants

You should also note, when buying a car privately, that the car could be subject to a warrant held by the Sheriff’s office.

Once the Sheriff has seized a car under a warrant authorising seizure of goods (issued in a civil proceeding (see Chapter 8.1: Debts) or because of a failure to pay a fine, for example), the Sheriff usually registers this interest with the VSR. However, the Sheriff is not bound by the CSA to do so. In a situation where the Sheriff does not register an interest that arose prior to your purchase of a car, the Sheriff, and not you, may have legal title (see Ward v Alan Mance Motors Pty Ltd(unreported, Supreme Court of Victoria, 21 December 1994, and the definition of security interest in s 3 CSA).

If the Sheriff has received a warrant to seize goods belonging to the seller but has not yet removed the car from the seller’s possession, and you have paid for the car, you may be forced to give the car to the Sheriff to satisfy the warrant. In this situation you will probably be unable to recover the money paid to the seller. Therefore, when buying a car privately, you should check with the Sheriff’s office that no warrant exists for the seizure of goods belonging to the seller. Try to get a letter from the Sheriff’s office confirming this.

It is the purchaser that must prove a car was purchased free from a security interest (s 7(3)).

In summary, you will normally obtain clear title unless one of the following situations arises:

there is an interest registered and you did not inspect the VSR;

the seller had no rights to the car (e.g. the car is stolen);

the Sheriff had received a warrant authorising seizure of the seller’s goods prior to your buying the car;

it can be shown that you knew of another interest in the car (this is termed “actual notice”); or

it can be shown that you suspected that another party had an interest in the car (this is termed “being put on enquiry”) and deliberately abstained from enquiring further.

Written-off vehicles

As of 1 May 2002, VicRoads has a register of written-off vehicles to prevent re-registration of unsafe vehicles and illegal “rebirthing” of cars. You should check with VicRoads that the car you plan to buy has not been registered as a write-off.

If it is registered as a “repairable write-off”, it can be re-registered if sufficient work is done to repair it. A “statutory write-off” cannot be re-registered. (See ss 16A16F RSA; regs 87100 RSV Regulations.) If a car has been listed as a repairable write-off in the past, this is likely to affect the price you should pay for it.